The sky’s the limit: Shenzhen joins the runway race with $1.4bn investment

April 24, 2019

Shenzhen has just got the go-ahead for a third runway, taking its capacity to about 80 million passengers a year. Hong Kong and Guangzhou are on growth spurts as well. Does the Greater Bay Area really need so many airports?

China’s first-time fliers were back in the news this month for hurling coins into aircraft engines for good luck. A few crazy customers are to be expected when so many people are flying, with China set to overtake the US as the world’s largest airline market within two or three years.

Airport construction is going gangbusters as well and the Greater Bay Area is no exception, despite already being home to five main airports within a 150km radius. Hong Kong’s was busiest with 75 million passengers last year, although Guangzhou has almost caught up with 70 million of its own. Shenzhen was still a little way back with 49 million, while Zhuhai and Macau reported 11 million and 8 million respectively.

It isn’t just Shenzhen that is in expansion mode: Hong Kong is already building its own third runway, which will take its capacity to more than 100 million within five years, and Guangzhou is talking about increasing its runways from three to five, allowing for 140 million passengers a year.

Taken together the plans cement the GBA’s status as the world’s leading aviation cluster. Yet that kind of capacity is still short of forecasts from IATA, the airline industry body, on demand for air travel from the Pearl River Delta in ten years time.

Simply put: the region is going to need more runways and more passenger terminals.

The basic landscape is likely to be a battle of the hubs between Hong Kong and Guangzhou, with smaller airports like Zhuhai and Macau taking on more niche roles. Shenzhen sits somewhere in-between, growing its international network but still dependent mostly on domestic traffic.

Hong Kong has the most flights to international destinations and the highest share of connecting traffic, with about half of the customers on its flagship carrier Cathay Pacific transiting through the city.

Guangzhou is ahead on its domestic network, although it is adding more destinations overseas as China Southern, its home carrier, grows its global reach.

Macau is more dependent on low-cost carriers from the Asian region, as well as point-to-point traffic from China coming to play at the enclave’s casinos. Zhuhai also focuses on mainland traffic, much of it with second-and third-tier cities.

The proximity of the group puts the onus on how each airport serves its target customers, as well as its successes in reaching into neighbouring areas for business. New road and rail connections will open up opportunities for each of the contenders to carry more passengers and air freight, but also to lose existing business to rivals.

Another feature for the future is how the airports choose to collaborate. Hong Kong’s airport has a major stake in nearby Zhuhai, opening up the prospects for a closer partnership across the recently opened Hong Kong-Zhuhai-Macau Bridge. With Shenzhen’s airport just 36km away, there was another round of speculation in the media this month about the construction of a Maglev rail link connecting the two as well.

That said, local officials could need persuading to cede their personal ambitions in favour of new partnerships and the risk is an airport arms race as each candidate pursues its own projects, forcing its rivals to respond in kind.

At least these competitive instincts should benefit passengers by giving them more options for travel. They will put pressure on the rival carriers in the region to keep down their fares too. But the projected increases in passenger numbers are also going to force the authorities to look at areas where better coordination is required. One of the priorities is a unified approach to air traffic control, which is currently divided across three jurisdictions. Congestion in the skies is already creating thousands of hours of flight delays and millions of tonnes in extra fuel burn. Adding thousands of new flights is only going to make the situation worse.

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